A7/SA report/nov10 1

A7/SA report/nov10 1

INFORMATION FOR CANDIDATES The senior assessor s report is written in order to provide candidates with feedback relating to the examination. It is designed as a tool for candidates - both those who have sat the examination and those who wish to use as part of their revision for future examinations. Candidates are advised to refer to the Examination Techniques Guide (see the following link: (http://www.cips.documents/examinationtechniqueguidejuly2010.pdf) as well as this senior assessor s report. The senior assessor s report aims to provide the following information: An indication of how to approach the examination question An indication of the points the answer should include An indication of candidate performance for the examination question Each question has a syllabus reference which highlights the learning objectives of the syllabus unit content that the question is testing. The unit content guides are available to download at the following link: http://www.cips.org/studyqualify/cipsqualifications/syllabuses/ ADDITIONAL SOURCES OF INFORMATION The Supply Management magazine is a useful source of information and candidates are advised to include it in their reading during their study. Please see the following link to the Supply Management website: http://www.supplymanagement.com/ A7/SA report/nov10 2

SECTION A Q1 B 2 marks Q6 A 2 marks Q2 C 2 marks Q7 C 2 marks Q3 A 2 marks Q8 C 2 marks Q4 C 2 marks Q9 A 2 marks Q5 B 2 marks Q10 D 2 marks Analysis of Section A Candidates performed less well than expected in Section A and in comparison to the last series. Average score being c10/20 (50%). Some candidates did however achieve 16+ and those who had clearly prepared well for this unit achieved close to full marks. Specifically questions 4-6 and 8-10, appeared to give problems where topics which should be researched further include: Q4 (differentiation v. standardisation), Q5 (reasons for strategic sourcing), Q6 (purchasing cycle), Q8 (strategic v. tactical decision making), Q9 (competitive advantage, Q10 (strategic cost reduction). SECTION B Q11 Answers should have focused on two strategic benefits of product diversification such as: Appeal to a wider audience, multiple market segments Lower risk portfolio (ie one product may perform well whilst others may not) More revenue streams Greater insight into customer behaviours Most answers achieved fewer than half marks in this question. Some made reference to product standardisation or rationalisation. Others picked up on larger sales revenue/profit and appealing to a wider audience but this was the limit of the answer. 2 ½ marks available for each benefit, up to 5 marks available. Q12 Answers should have identified five benefits of introducing an e-procurement system including any of the following: Speed of Requisition to Pay execution and delivery increased (e.g. cycle time) Internal Operational cost reduction as a result of less staff required Quality and accuracy enhanced (e.g. less human error / order matching) Cost savings (e.g. generally for reverse auctions results achieved are in excess of conventional process) Improved forecasting etc as a result of consistent data/metrics. This question was very straight forward and majority of candidates achieved high marks. However many candidates often repeated elements of their answer in multiple points or A7/SA report/nov10 3

stated that e-procurement would improve lead time to delivery (e-procurement will only improve the cycle time of the procurement process itself). 1 mark available for each point. Q13 In this question, candidates were required to provide five issues which need to be considered when outsourcing a product or service. Answers could have included: Is there a competent supplier base which can support the outsourced product/service? Is the service to be outsourced core or non-core competence? What are competitor companies doing in the same market? Is the trend towards outsourcing? Is it more cost effective to in-source or outsource? Is the decision to outsource aligned with the corporate strategy of the organisation? Weaker answers failed to consider outsourcing and jumped straight into detailing Right Price, Time, Place, etc. The question was looking for more insight into questions a purchasing professional should ask when considering outsourcing. This said, many candidates gained high marks in this question. 1 mark allocated for each suitable point, up to 5 marks available. Q14 This question required candidates to identify two ways in which Bottleneck risks from the Supply Positioning Model can be mitigated. Answers could have included the following: Safeguard continuity of supply through long-term contracting Build stock of agreed bottleneck items to avoid production delays Consolidate spend across other bottleneck items to drive larger $ volume Ensure solid risk mitigation plans in case of critical item failures. From Section A, this was probably the best answered question since majority of answers correctly identified long-term contracting and buffer stocking as the two methods. Other good answers talked about consolidating and standardizing these items in order to open up the market to additional competition thus reducing reliance on suppliers. 2 ½ marks per point, up to 5 marks available. A7/SA report/nov10 4

Q15 This question required candidates to draw the standard and well known experience curve as shown below. Alternative valid representations gained appropriate marks. Some candidates used incorrect axis descriptions or provided poor explanations. It would be worth refreshing understanding of this model in further study. 3 marks allocated for diagram and 2 marks for explanation, up to 5 marks available. Q16 Time In part (a) of the question, candidates were required to identify two costs of poor quality. Part (a) answers could have included: Scrap and re-processing cost Customer complaints Reputation / legal issues Processing time increased. The vast majority of candidates achieved the 2 marks available for this part. In part (b) candidates needed to explain how ISO can reduce costs of poor quality: Through use of audited, process control to drive better quality outputs Less wastage / cost savings Assists with customer value proposition Improved efficiency. For part (b), answers picked up on the use of internationally recognised and audited standards driving out quality issues and therefore allowing benchmarking to take place. However some less prepared candidates simply jumped into an answer which would have been suited more towards Q17 (features and benefits of TQM). A total of 5 marks available. SECTION C Q17 (a) Total quality management (TQM) is a philosophy which should (6 marks) A7/SA report/nov10 5

Q17 (b) Q17 (c) involve all employees at all levels of an organisation, but which is often difficult to achieve. Explain THREE components of a typical TQM programme. Describe TWO benefits of implementing a TQM philosophy. Explain TWO ways in which an organisation s suppliers may become involved in TQM activity with the organisation. (5 marks) Analysis of Question Part (a) required candidates to explain three components of a TQM programme. The list below provides typical answers which would have been expected: Zero Defects: Involving zero tolerance on any quality defects throughout the production process Right First Time / Kaizen: No error rate acceptable, a culture of getting it right Top Down Bottom-Up Organisation wide involvement: All employees must fully understand and be committed to the philosophy Quality circles ISO9000 type process control Leadership/vision to TQM. Planning the Answer: answer needed prior knowledge of key elements of a TQM programme as identified above. Part (b) required candidates to identify two benefits of implementing TQM: Efficiency improvement in production Cost reduction Enhanced customer reputation Less re-work / returns Motivating for staff (ie high standards). Planning the Answer: required candidates to identify benefits of implementing TQM. Part (c) required candidates to give two ways in which suppliers might become involved in a TQM programme: Through quality circles involving supplier Through cross-functional teams involving suppliers Through bring best practice from other top-quartile client organisations Planning the Answer: required application specifically how a supplier might be involved in a TQM programme. It was the most challenging part of the question. A7/SA report/nov10 6

Analysis of the Answer For part (a), most candidates identified at least two elements of a TQM programme. Most common answers were Top-Down / Bottom-Up involvement across the whole company in pursuit of quality and Right First Time. Part (b) was the easiest question and candidates needed only to discuss cost efficiencies, customer satisfaction and motivation as benefits for the full marks. Part (c) was slightly tougher requiring application as to how a supplier would be involved. Most answers described suppliers providing goods/services to required specification right first time for example. This was a little disappointing and we would have hoped for more insight. Exam Question Summary Whilst majority of candidates scored well on parts (a) and (b), part (c) pulled scores down. Question 17 was the weakest answer generally across the whole paper.. Q18 (a) Q18 (b) Q18 (c) Q18 (d) Describe TWO risks for ABC which may arise from how it currently deals with its key suppliers. (b) Discuss TWO ways in which ABC might improve its relationships with suppliers. (c) Explain TWO ways in which the use of key performance indicators (KPIs) might help to avoid disagreement between suppliers and ABC. (d) Describe TWO potential problems of implementing a supplier development programme within ABC. (3 marks) Analysis of the Question Part (a) required candidates to identify risks associated with ABC s current treatment of its supplier base. Key issues to have considered as follows: Risk is that key suppliers have no respect for ABC which leads to adversarial relationships and overall relationship decline Risk is that key suppliers will walk to other customers or put poor quality resources into the work with ABC Co. Part (b) required application as to ways in which ABC could improve its supply relationships. Answers could include : Enhanced working relationship with key suppliers as a result of closer working via quality circles, cross functional teams, etc Introduction of a long-term supplier relationship programme to drive right behaviours Part (c) required candidates to identify how KPIs could help avoid disagreement between suppliers and ABC. Answers here could include: A7/SA report/nov10 7

By providing a set of clear, objective criteria which measure success/failure against contract Joint ownership and scoring of agreed KPIs Part (d) was practical in nature and required candidates to think about practical issues/problems which could present themselves if ABC attempts to move towards supplier development programmes. Change the culture / behaviours engrained within ABC Co Training needs/requirements Planning the Answer: Marks in this question were well balanced across each part of the question and therefore each part demanded broadly equal attention. Some candidates simply repeated answers from (a) in part (d). Analysis of the Answer Within part (a) most candidates achieved high marks and identified the two key risks based on application of the case study. In part (b) most answers identified long-term contracting as one way in which ABC could improve its approach. However the reality as some answers identified is that few suppliers would currently buy into long-term relationships based on their treatment. The practical measures such as quality circles, joint problem solving, etc were only mentioned in some answers. Part (c) was the weakest answer in general with answers struggling to articulate how KPIs can be used. Part (d) was a build on part (a) where candidates should have referred to change management issues as a result of how ABC currently act. Exam Question Summary Generally the answers provided were better in this question than Q17. However more study should be directed to part (b). A7/SA report/nov10 8

Q19 (a) Q19 (b) Q19 (c) Q19 (d) Q19 (e) Suggest a suitable mission statement for ConsortiProcure.Com. Describe TWO ways in which CP could analyse its overall purchasing. Describe TWO difficulties which CP may encounter when negotiating supplier contracts. Describe TWO benefits of a consortium arrangement for suppliers with CP contracts. Outline FIVE ways in which CP might ensure that the expected product and service quality are delivered to consortium members. (3 marks) (5 marks) Analysis of the Question Part (a) required candidates to draft a suitable Mission statement. Part (b) required candidates to identify two methods of analysing overall purchasing. This could have included: Pareto Analysis: Looking for the 20% of suppliers which typically make up 80% of the spend Supply Positioning Model: Looking at which type of purchase the different suppliers typically fit into Analysis of products bought/not bought by members Note that other tools to analyse its purchasing strategy (eg SWOT) were also acceptable. Part (c) required candidates to identify two difficulties associated with negotiating supplier contracts which could include the following: Must be non-exclusive deals since hospitals may still source their own suppliers No minimum volume commitment since hospitals may refuse to use the consortium deals No maximum volumes possible to drive best possible terms Part (d) required candidates to put themselves in position of a CP supplier and identify the benefits accordingly from the following: Access to wider revenue streams than contracting with single hospitals Large business potential via the consortium Single point of contact so less administration / handling cost, etc Part (e) required candidates to identify five ways in which quality could be assured from the following: Use of service level agreements / KPIs, etc Process for issue/service and quality escalation in the event of default Robust contracts with strong terms and conditions (eg guarantees/warranties) Inspection at supplier premises A7/SA report/nov10 9

Quality assurance processes/accreditation Analysis of the Answer Part (a) despite being worth the least amount of marks was the most challenging since few answers were able to articulate an appropriate mission statement. Part (b) was also weak in terms of responses where answers often failed to read the question around analysing purchasing activities. Good responses correctly identified Pareto, Supply Positioning Model, SWOT, etc as methodologies to use. Part (c) required application of the case and an appreciation that the supply base of CP was large and quality a challenge as well as the hospitals not being mandated to purchase via CP. Thus meaning that rationalisation and quality improvement was much needed, issues which would impact effectiveness of any negotiation. Part (d) weaker answers often fell into describing benefits to CP as opposed to the question which required benefits to the supplier. This was disappointing. Part (e) was well answered by the majority with many good answers and high marks. Exam Question Summary In summary, majority of candidates achieved high marks on part (c) and (e). However many responses were weak on parts (a), (b) and (d). A7/SA report/nov10 10

APPENDIX : Syllabus matrix indicating the learning objectives of the syllabus unit content that each question is testing Learn Obj Section A Section B Section C Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 1 Corporate strategy and purchasing and supply 1 x 1 x 1 1 2 Objectives of supply chain management 2 x x Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 a b c a b c a b c a b c a b c a b c a b c d a b c d a b c d e 2 x x x x x x x 2 x x x x x 2 x x 3 3 Elements of overall supply strategy 3 x 3 3 3 x 4 4 x x x x 4 Dealing with individual purchases 4 x x x x x x x 4 x x x x x x x 4 x A7/SA report/nov10 11